Standing Committee B

[Mr. Win Griffiths in the Chair]

Pensions Bill

Clause 20 - Freezing order

George Osborne: I beg to move amendment No. 137, in
clause 20, page 12, line 14, leave out 'interests' and insert 'rights'.

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment No. 138, in 
clause 20, page 12, leave out lines 16 and 17.
 Government amendments Nos. 19 to 22. 
 Amendment No. 139, in 
clause 20, page 13, line 6, leave out paragraph (g).
 Government amendment No. 23. 
 Amendment No. 140, in 
clause 20, page 13, line 15, leave out subsection (6).
 Amendment No. 141, in 
clause 20, page 13, line 34, leave out paragraph (b).
 Amendment No. 142, in 
clause 21, page 13, line 42, leave out subsection (2).
 Amendment No. 143, in 
clause 21, page 14, line 40, leave out subsection (8).
 Amendment No. 144, in 
clause 22, page 15, line 4, leave out subsection (3).
 Amendment No. 145, in 
clause 22, page 15, line 6, leave out subsection (4).
 Government amendments Nos. 24 and 25. 
 Amendment No. 146, in 
clause 24, page 15, line 34, leave out subsection (4).
 Government amendments Nos. 26 and 27. 
 Amendment No. 147, in 
clause 27, page 17, line 20, leave out 
 'as soon as reasonably practicable' 
 and insert 'within 48 hours'.
 Amendment No. 148, in 
clause 27, page 17, line 33, leave out subsection (5).
 Government amendment No. 28. 
 Amendment No. 149, in 
clause 28, page 17, line 40, leave out 
 'any enactment or rule of law, or any'.
 Government amendment No. 90. 
 Government new clause 2—Effect of determination to wind up scheme on freezing order.

George Osborne: I welcome you to the Chair, Mr. Griffiths. I shall speak to the amendments that
 deal with clause 20 and the new freezing order power that the Government propose to give to the regulator. In your wisdom, Mr. Griffiths, you have also selected amendments to later clauses, which deal with the consequences of the freezing order, its period of effect, the validation of actions in contravention of such an order and so on. If possible, I would also like a brief stand part debate so that we can talk about the effect of the new order and whether it is necessary—but first I shall speak to the amendments tabled in my name.
 Amendment No. 137 would substitute the word ''rights'' for the word ''interests''. The point of a freezing order is so that the regulator can act when, in the words of the clause, there is 
''(i) an immediate risk to the interests of members under the scheme or the assets of the scheme, and
(ii) it is necessary to make the freezing order in order to protect the interests of the generality of the members of the scheme.''
 I felt, as did my hon. Friend the Member for Eastbourne (Mr. Waterson), who is not with us this morning, that the word ''interests'' was rather vague and woolly, particularly when it is further diluted by the phrase, 
''the generality of the members of the scheme'',
 which could be taken to mean almost anything. It could be used to justify things that are to the detriment of a minority of members. One would assume and hope that the regulator would not do that, but it is possible. 
 We thought that the word ''rights'' in this context was more specific, and a more familiar term in the pensions world. Presumably, rights are what the regulator would be trying to protect when it stepped in with a freezing order to help members. 
 Amendments Nos. 138, 139 and 140 are all probing amendments. Amendment No. 138 also relates to subsection (2), and would remove its last two lines, which state: 
''no freezing order may be made in relation to a scheme during an assessment period''—
 that is the period when the pension protection fund is considering the scheme and whether to act. Why is it necessary to say that the power to issue a freezing order should not be removed from the regulator in those circumstances? Is it because, under clauses 104 and 105, the PPF has equivalent freezing order powers? Can the Under-Secretary explain why the Government are restricting the scope of a freezing order? 
 Amendment No. 139 would delete subsection (4)(g). We tabled the amendment because we were not clear why statements of entitlements should not be sent to members. I would have thought that when a scheme is frozen, that is, or could be, a period of enormous uncertainty and anxiety for members. They may be keen to know what their entitlements are under the scheme. It therefore seems curious that there could be a direction that no statement of entitlements is to be provided. Will the Under-Secretary explain that? 
 Amendment No. 140 would remove subsection (6), which says that a freezing order may not reduce benefits payable to a member 
''below the level to which the trustees or managers of the scheme would have power to reduce them''
 if there had been a winding-up order. When I was reading the Bill, it was not clear to me what was envisaged. I should have thought that the point of the freezing order was to give the regulator the power to intervene immediately when there is 
''an immediate risk to the interests of members''.
 In other words, it is an emergency power. 
 When we come to later clauses, we shall discuss how the effect of the order is time limited. The power is envisaged only as a short-stop, while a longer-term solution is sought, which could include winding up the scheme. Subsection (6) may suggest that the scheme can stop paying out reduced benefits during the time of the freezing order. Surely it would be better to wait until the future of the scheme is clear before making such a decision. 
 Amendment No. 141 would prize the tentacles of the Secretary of State off at least a small part of the Bill. Subsection (7) states that a 
''freezing order may also require the trustees or managers of the scheme to obtain an actuarial valuation within a specified period.''
 That is a perfectly reasonable proposal. We do not dispute that. However, subsection (9) defines an actuary by saying that it is either the scheme actuary or, if there is no scheme actuary, 
''a person with prescribed qualifications or experience''—
 that is reasonable— 
''or—a person approved by the Secretary of State.''
 That could be anyone. It could be you, Mr. Griffiths. It could be me. It could be the Secretary of State's crony. As I understand it, there is no requirement for that person to have any qualifications or experience. We assume that, being a wise man, the Secretary of State would not appoint someone without the necessary qualifications, but that is not in the Bill. There is no requirement for the person who may be required to provide an actuarial valuation under subsection (7) to be an actuary. 
 We are familiar with the tendency at the highest levels of the Government to appoint people with little experience and qualifications to important posts, but surely at the coal face—the junior ministerial level, say—where there is much more experience and more qualifications, they should be more tempted to insist that people have the necessary qualifications and experience. 
 Amendment No. 142 is a probing amendment. What is the point of subsection (2) of clause 21, which is about the consequences of a freezing order? It states that a freezing order does not prevent an increase in accrued benefit, yet subsection (3)(a) of clause 20 states that 
''no benefits are to accrue''
 when there is a freezing order. I am sure that there is a sensible explanation for that, and it would be interesting to hear the Under-Secretary explain it. 
 Amendment No. 143 is similar to amendments Nos. 146 and 148, which I shall deal with as a group. They refer to the penalties that will be put in place if someone fails to comply with the orders of the regulator, be they about the freezing order in general, the process of winding up a scheme or the notification requirements under clause 27. The penalties follow the powers under the Pensions Act 1995. They include hefty fines, and before we give the regulator to power to levy them, we should ask whether they are necessary, whether the Government considered reviewing the powers in section 10 of the 1995 Act, what is the maximum fine, and whether it has been uprated since the Act was passed. The maximum fine under the Act was £5,000 for an individual and £50,000 for a company. 
 Amendments Nos. 144 and 145 are more substantial than the three previous amendments, and relate to clause 22, which deals with the period of effect of a freezing order. Should the Committee agree my amendments—I am always an optimist, Mr. Griffiths—they would prevent the regulator from extending the freezing order beyond three months, thereby restricting the total period in which a freezing order can be put in place to three months instead of six months. One has to remember that the freezing order is an emergency power and is brought in only when there is an immediate risk to scheme members. A regulator should be able to decide after three months what to do with the scheme and how to proceed—whether to allow it to continue, wind it up, or do whatever it feels is necessary. 
 Anyone with constituency cases relating to the winding up of schemes will know how long they can take, how frustrating they can be for our constituents, and that they are a cause of great anxiety to them. One hopes that the whole point of having the regulator in place is to speed up some of the processes. That would be great for all of us. However, the six-month freezing order could add to the delay and add to the anxiety of the people whom we represent at a time when their scheme is in trouble. Three months is enough. 
 The Government implicitly accept that three months should be the normal period. Clause 22(2) says that the initial order cannot exceed three months, so why not limit the overall freezing order to three months?

Steve Webb: The hon. Gentleman will know that when schemes are wound up there is often a delay caused by delays in obtaining information from the Department for Work and Pensions. In some cases it takes a long time to get information about guaranteed minimum pensions, and so on. Does he think that this is an escape clause, in case the Department cannot obtain the information in time? What would happen if the period were restricted to three months and the Government could not provide the information in time?

George Osborne: The hon. Gentleman makes a fair point. I suspect that the Government would provide the information. Departments are like schoolboys with their homework—it all depends how much time they have to do a job. If they are told to do something in 24 hours, they do it; if they are told that they have
 six months, they do it five months and 28 days later. It is reasonable to put the discipline of a three-month limit on the regulator and the Department.
 Amendment No. 147 is similar and would amend the clause dealing with the notification of trustees, managers, and so on, when a freezing order is applied. The regulator must, under subsection (2), 
''as soon as reasonably practicable after the order has been made, notify . . . the trustees or managers of the scheme, and the employer''
 about the fact that a freezing order exists. I will deal with when the members of the scheme should be informed when we discuss clause 27. The words ''reasonably practicable'' are a bit woolly. Given that a freezing order is imposed when there is an immediate risk to a scheme, and given the draconian powers over trustees and others who do not comply with the freezing order, those people need to be told immediately, not least to stop them doing something that may turn out to be illegal and jeopardise the benefits in the scheme. 
 I suggest changing 
''as soon as reasonably practicable''
 to ''within 48 hours''. I would have thought that once the regulator had proposed the freezing order, it would be possible to inform the trustees, the managers and the employer within 48 hours. 
 Finally, I turn to amendment No. 149. It relates to clause 28, which is innocently entitled ''Supplementary provision relating to orders under sections 20 to 27''. Subsection (1)(a) seems extraordinarily broad in its sweep—almost Cromwellian, one might say. It states that the regulator may make an order 
''in spite of any enactment or rule of law . . . which would otherwise operate to prevent the order being made''.
 That is quite a power; it allows the regulator to do anything, even if there are other enactments and rules of law to prevent it from doing so. That is a very wide-ranging power. Will the Under-Secretary explain why it is necessary and give some examples of how it might work in practice?

Chris Pond: Good morning, Mr. Griffiths. This morning we are discussing an important new regulatory power, which the Occupational Pensions Regulatory Authority has identified as one that would be a useful additional tool, and which has been welcomed by the industry overall. It is the power to issue a freezing order. I will first run briefly through the points raised by the hon. Member for Tatton (Mr. Osborne). If hon. Members would like further clarification afterwards, I will be happy to give it.
 On amendment No. 137, the hon. Gentleman asked why we are talking about preserving scheme members' generality of interest rather than their rights, as the amendment proposes. The proposed wording is much narrower than the question of interests, which could cover not only the actuarial rights of scheme members but their wider rights related to their employment status, employment security and so on. We believe that it is important to take those into account and to ensure 
 that the generality of interests of all scheme members is observed. The hon. Gentleman suggested that the term ''rights'' was more familiar to the pensions world. Neither my hon. Friend the Minister for Pensions nor I wish to continue repeating this, but I must tell the hon. Gentleman that ''interests'' is the term used in the Pensions Act 1995, and that is why we have carried it across into this legislation. 
 On amendment No. 138, the hon. Gentleman asked why a freezing order could not be imposed during an assessment period. It is simply because that would largely duplicate the powers and arrangements. An assessment period provides somewhat wider powers, but those would subsume the powers provided under a freezing order.

George Osborne: Is the Under-Secretary saying that the powers during an assessment period include all the powers that exist with a freezing order, but with some additions?

Chris Pond: Yes, that is generally right. Of course, the circumstances are different in each case. A freezing order is there as an additional power for the regulator to try to sort matters out before they get to a stage at which there might be an assessment period, in which the PPF would have to consider whether to intervene on a scheme or a winding-up order. A freezing order is one section further back from that process. So there would be slightly different powers, but there would be general duplication if one had a freezing order during an assessment period.
 Amendment No. 139 understandably raises the question why scheme members should not be issued with a guaranteed statement during a freezing order. Schemes going through a freezing order may well subsequently go into wind-up. In those circumstances the trustees, having already issued a statement of members' entitlements, would have a legitimate right to reduce those entitlements and issue a new statement, and that would of course create confusion and raise expectations that might quickly be dashed. During the period of a freezing order, that would not be a sensible way forward. 
 Amendment No. 140 probes the issue of why the Bill limits the regulator's power to reduce benefits to the level that they would be at during wind-up. That is simply to ensure that there is some limit to the regulator's powers; I suspect that the Committee will think that appropriate. We have to ensure that, during wind-up, things are no worse for members' interests than they would otherwise be. 
 On amendment No. 141, the hon. Member for Tatton was worried about the definition of ''the actuary'' and the role of the Secretary of State. He will understand that normally the scheme actuary would be required to evaluate the scheme during the process of freezing or wind-up, but that there may be times when he is unavailable. He may be sick, on holiday or on sabbatical, for example. Of course, it is necessary to get a speedy valuation when that happens. Therefore, we need an alternative, someone with the qualifications and experience to fulfil that role; there is no argument about that. 
 Also, the Secretary of State can approve a person to act as a scheme actuary. That is not an unfettered power by which he can impose anyone that he thinks fit whom he passes in the street. In approving a person to work as a scheme actuary, the Secretary of State will, of course, look with rigour at members' qualifications in that sphere. Only those people with sufficient training and professional qualifications would be considered to be professional. 
 On amendment No. 142, a question was asked about preventing accrual during the period of a freezing order. Although a freezing order effectively means pressing the pause button on the scheme, the intention is not to make the circumstances of members better or worse during that period. Clause 21(2) is intended to ensure that neither happens. 
 I come to amendment No. 143 and the other amendments relating to the penalties under section 10 of the 1995 Act. Although the penalties rise to punitive levels, especially where it seems that an individual or employer is acting wilfully and inappropriately—then, the penalties can be quite fierce—OPRA believes that the penalties are appropriate, and does not think that they need to be reviewed. We have taken that advice.

George Osborne: I asked the Under-Secretary, on a point of information, whether the maximum amount was still £5,000 in the case of an individual and £50,000 in any other case. Those were the amounts in the 1995 Act, but there was a power for the Secretary of State to amend the provision and substitute higher amounts.

Chris Pond: Yes, those figures are still in operation. However, as the hon. Gentleman says, there is opportunity for the Secretary of State to amend those as appropriate. Amendments Nos. 144 and 145 concern the extension of freezing beyond the three-month period. That is a legitimate point for the hon. Gentleman to raise, because a freezing order is intended to be pretty immediate. It is intended to deal with the situation within hours or days to protect members' interests if it appears that a scheme is running into trouble, and it is intended to be temporary. That is why we have said that although we expect that a freezing period of three months will normally be long enough for the regulator to make the appropriate judgment, it will have the power to extend the period, but to no more than six months. It needs that extra flexibility because circumstances could arise in which scheme records are not up to date or the regulator needs further information to make the appropriate judgments. We do not expect that the extension will be used in many cases but the regulator needs that flexibility. This is a new kind of regulator—one that is flexible and interactive—and we want to ensure that there is as much flexibility as possible.
 Amendment No. 147 deals with the notifying of freezing orders and the circumstances of them to members and trustees within 48 hours. We agree that these measures must be taken as quickly as possible. We do not want there to be any delay in information getting through to members, but that might not always be possible within 48 hours. We must recognise that 
 many schemes will have increasing numbers of non-UK members, and the structures of the firms may be complex. Therefore, 48 hours is an artificial limit with which to constrain the regulator.

George Osborne: Is it the case that a trustee or employer who acted in good faith and was unaware that a freezing order was in place on their scheme would not suffer a punishment?

Chris Pond: I think that that is dealt with elsewhere in the clauses that we are considering this morning. If a trustee acted in good faith and without the necessary information, the regulator would take account of that. The question implies that a trustee could be subject to penalties because the regulator had failed to give him or her the necessary information in time. That is clearly not the case. Whether trustees acted in good faith is relevant. It is for the determinations panel to judge whether they did so.
 I turn to amendment No. 149. Why does a freezing order override any other enactment or scheme rules? As its name implies, the purpose of a freezing order is to freeze the circumstances of a scheme to ensure that the members' interests are not artificially enhanced or deteriorated during the relevant period. Many forms of enactment or scheme rules might impinge on the scheme during that period. If they were to be allowed to override the freezing order, there would be no point in this Committee deciding that the Bill should include the freezing order power for the regulator. The freezing order lasts for a short period—normally three months and never more than six months, except in the special circumstances when the case goes to a tribunal. Therefore, the freezing order should have a full effect. 
 The Government amendments are all technical amendments; they are intended to aid interpretation of the Bill, to erase any possible ambiguity or to correct oversights in the original drafting. None of them significantly changes the nature of the Bill.

George Osborne: I take the Minister's point that the amendments are technical, but perhaps he would tell us something about new clause 2.

Chris Pond: The hon. Gentleman is right. It is important to explain that new clause 2 will ensure that when the regulator determines to wind up the scheme, the freezing period will extend to the conclusion of any reference to the pensions regulator tribunal, or any subsequent appeal from that tribunal, should it or the court think that the freezing order should continue until a final decision is made. That is something to which I referred briefly earlier. This is a technical arrangement, which is necessary to ensure that the tribunal can consider an appeal properly without any significant change in the circumstances of members' interests or the generality of those interests. I ask the hon. Gentleman to withdraw his amendment.

George Osborne: I shall not detain the Committee much further. I take the Under-Secretary's explanation of the amendments, and of things such as penalties. I am a little concerned, however, especially as the phrase ''as soon as reasonably
 practicable'' will remain in the Bill and there are no specific time limits to ensure that the regulator gets on and informs people that a freezing order is in effect. I am also concerned about the fact that the freezing order can last for six months rather than three. None the less, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Amendments made: No. 19, in 
clause 20, page 12, line 17, after 'section 104)' insert 
 'in relation to the scheme'.
 No. 20, in 
clause 20, page 12, line 30, after 'behalf of' insert 'the employer,'.
 No. 21, in 
clause 20, page 13, line 3, leave out 'they' and insert 
 'the amounts paid out from the scheme in respect of the transfers or transfer payments'.
 No. 22, in 
clause 20, page 13, line 4, after 'and' insert 
 'the transfers or transfer payments'.
 No. 23, in 
clause 20, page 13, line 9, leave out 'For the purposes of' and insert 'In'.—[Mr. Pond.]
 Question proposed, That the clause, as amended, stand part of the Bill.

George Osborne: I would like a brief discussion on the new power of the freezing order. It is always a little unsatisfactory, although I know why we do things this way, to have to discuss the amendments before we discuss the generality of the clause.
 As the Under-Secretary has acknowledged, the freezing order is an important new power for the regulator. It is somewhat draconian, and quite an extension of the powers now available to OPRA. It is therefore fair to ask why the Government felt it necessary to introduce the new power. Where was the gap in OPRA's powers that the new power fills? It will be administratively complex and may be fairly costly. Perhaps the Under-Secretary can give us some practical illustrations of where the power might be needed because existing powers are not sufficient. An example—example B—is given in the factsheet that the Minister for Pensions sent Committee members: a pensions scheme is underfunded and the employer is not paying in sufficient contributions. Although that would be serious, would it be an immediate risk to the interests of members, as set out in clause 20? Perhaps the Under-Secretary could explain how a freezing power would add to the regulator's ability to deal with that. 
 The costs of the freezing order are likely to be great. Who will be required to cover them? Does the Under-Secretary envisage that the regulator will use the freezing order for all sorts of schemes of different sizes? Does he envisage it being used primarily for small schemes, or could it be used for large schemes? When it is likely to be used? Would it apply to pensions schemes all of whose members are also trustees? Presumably, it would, but would it be useful in such cases? Is it expected that in all circumstances after the issue of a freezing order, the existing trustees 
 of the scheme will remain in place with unaltered powers? 
 If the freezing order specifies that no benefits are to be paid to pensioners, what are they expected to live on during the period for which it applies? They may not receive anything for up to six months, which could cause some hardship. Perhaps I have got that wrong and the Under-Secretary will clarify things. It is an important point to clarify, because that would be of great concern to scheme members. 
 Perhaps my most important point is that clause 20(1), which says, 
''This section applies''
 only 
''to an occupational pension scheme which is not a money purchase scheme.''
 The Under-Secretary should explain why that is so. The risks to members' interests or scheme assets can arise in money purchase schemes, too, and they may also need the regulator's protection. That reflects a more general point, into which I do not propose to go at great length, which is that this power—as in many other parts of the Bill—is focused largely on defined benefit schemes, although most people in the industry would accept, and most of us realise, that the future lies increasingly with defined contribution schemes. Surely we should be equipping the regulator with the powers to deal with the future.

Steve Webb: I have some questions that were not raised under the amendments. Like the hon. Member for Tatton, I should be grateful for further clarification about when the powers in the clause would be invoked. One can understand that the assets of a fund might be doing well or badly, and that an employer might or might not be putting money in, but I am still slightly hazy about what is gained by freezing. What is it that these powers prevent from happening? I hope that the Under-Secretary will clarify that. I also echo the question that has just been asked about whether the examples that he will provide are the sort of thing that happens exclusively in final salary schemes. One imagines that the things that might go wrong with company schemes could be of a general nature, and would not apply only to final salary schemes. I am curious to know why the scope of the clause is restricted to those schemes.
 I am unclear about whether the words 
''no benefits are to accrue under the scheme''
 in subsection (3)(a) mean that although my pension is dependent on my length of service, for those three months I am treated as if I were not a member of the scheme, and do not build up another three months of service. When the freezing has ended, does the scheme have the power and duty to say, ''Ah, but you did actually work for those three months, so those rights will now accrue to you,'' because the Bill says only that the benefits do not accrue? Are the benefits deferred, or are they lost for ever? 
 If we are worried about some sort of fraud, and things have to be frozen so that nothing can be touched, how do the provisions of the clause relate to the fraud compensation scheme and the fraud elements 
 in the Bill? Is this about fraud or mismanagement? I am not clear when the power would be invoked. 
 We got no answer about how the provision in subsection (3)(a) that 
''no benefits are to accrue''
 is consistent with clause 21(2), which says: 
''A freezing order.. does not prevent any increase in a benefit which is an increase which would otherwise accrue''.
 Will the Under-Secretary clarify that? I am sure that the clauses are consistent, but I cannot quite see how.

Chris Pond: I shall respond first to the points made by the hon. Member for Tatton. He described the measure as draconian; frankly, it is quite the opposite. Most scheme members would consider that the draconian option would be pressing the nuclear button and winding up a scheme.
 This is an additional power, which, as I said at the beginning, has been identified by OPRA as a power that would be valuable because it is one step short of winding up a scheme. When a scheme looks as if it might be running into trouble, the power gives the regulator an opportunity to move in and assess whether the scheme really is getting into trouble. When a scheme is frozen, it enables the regulator to go through a process, perhaps requiring trustees to take certain actions. 
 The hon. Gentleman repeated the example of a scenario in which insufficient contributions had been made to a scheme that was clearly underfunded. During that period, the regulator may well require an adjustment of contributions. There may be an opportunity for negotiation between the employer, the trustees and the members to resolve some of the difficulties that would otherwise arise. 
 This is a valuable new power, which would add to the regulator's ability to deal with such a situation, short of winding up. However, we have to recognise that in many cases it will be the step before winding up. If that is the outcome—it will not necessarily be the outcome—there will be more information available to the regulator, because of the pension protection fund, by the time the scheme gets to that stage. It is therefore a valuable process in itself. 
 Who will pay the costs of the freezing order? That will vary according to the circumstances of the case. In the main, the costs will be borne by the regulator and the scheme itself, and the proportions will vary from scheme to scheme. If a scheme is badly underfunded, adding the costs of a freezing order might be unwise. However, if the regulator decides to appoint a trustee, it may direct that the costs of that trustee should be met by the scheme, the employer or both.

George Osborne: Presumably the scheme could appeal a decision on costs.

Chris Pond: I will have to seek inspiration on that point. My assumption is that it could, but I will come back to the hon. Gentleman on that subject. [Interruption.] I have just had an inspired thought—yes, there will be an opportunity to seek an appeal.
 The hon. Members for Tatton and for Northavon (Mr. Webb) asked why the power would apply only to final salary defined benefit schemes. We are talking about schemes with a funding requirement. In a money purchase scheme, also described as a defined contribution scheme, the employer and employee pay a fixed contribution and the proceeds are used to purchase an annuity, which provides the pension. No risk is borne by the employer, so no funding question is involved. However, with defined benefit schemes there is such a question. That is why we need to make sure that we have the additional power, to freeze circumstances in such schemes. Such a power would not assist defined contribution schemes at all. 
 The hon. Member for Tatton also asked whether that would apply to big schemes, small schemes or schemes in which all members are trustees. That would be a matter for the regulator to decide on the basis of the circumstances of the particular scheme. It would be wrong for us to try to put in the Bill any detailed definitions of which schemes could be treated to the opportunity of a freezing order—if that is the correct phrase. 
 The hon. Member for Tatton also asked whether it is appropriate to allow existing trustees to remain with unaltered powers. There are other measures within this group of clauses that allow the regulator to remove and prohibit trustees. In some circumstances, it might be other factors, not the trustees' actions, that are the problem, so it might be appropriate to leave them where they were. 
 I was asked about the important question of what would happen to the members of the scheme, and to the pensioners, if no benefits were to accrue during the period. I must emphasise that nothing would happen to their entitlement, and payments would continue to be made. The issue concerns the accrual.

George Osborne: That is an important point to nail down. What happens to people who reach retirement during a freezing order?

Chris Pond: That is one of the reasons why the freezing order is so important. We must ensure that while the assessment is being made, individual members of the scheme do not change their priority within the scheme and move from being active members of the scheme—employees—to being pensioners. In that process they would move up the priority order and their claim on the scheme would be increased, which would result in the generality of interests of the other scheme members being diminished during the freezing order.

George Osborne: If someone retired because they had reached the age of 65 and their company required them to do so, and if their retirement were on the first day that the freezing order came into effect, they might not receive their pension for six months if the freezing order were for that duration. Such a person might have expectations, mortgages and so on that they were relying on those payments to cover, and they might face some hardship. Obviously, they would receive the state benefits, but those might not be enough to cover their financial obligations.

Chris Pond: I should clarify the fact that people who reach retirement during the period will still get their pension, but it will be at the level that they would have received if they had retired as deferred members. The hon. Gentlemen mentioned a situation where someone reaches retirement age just as, or just before, the freezing order is imposed. I should explain that the regulator will have an opportunity within the freezing order to make a judgment that a particular action, such as the moving into retirement of that individual, does not reduce the overall generality of interests of the members—in other words, that this is a right that had already accrued. In those circumstances, the regulator could decide to validate that action. However, it would have to be positive validation, and whether that was allowed to happen would be for the regulator to judge.
 The hon. Member for Northavon asked what is meant when the Bill says that no benefits would accrue under the scheme. Clause 26 gives the regulator the power to make directions to cover the period of the freeze when no wind-up order is made. For example, if the scheme and the employer are sufficiently healthy, the regulator can order benefits to have accrued for the freezing period. The regulator's objective is to protect members' benefits. If the circumstances make it right to order an accrual of benefits during the freezing period, the regulator can do that. If it is not in the interests of the generality of the members, the judgment might be that that is not the right thing to do. I think that I have answered most of the points that have been raised by hon. Members, and on that basis I commend clause 20 to the Committee. 
 Question put and agreed to. 
 Clause 20, as amended, ordered to stand part of the Bill.

Clause 21 - Consequences of freezing order

Question proposed, That the clause stand part of the Bill.

Steve Webb: I seek your guidance on your procedural custom, Mr. Griffiths. The Committee would value brief presentations on clauses that contain very technical material. We do not want to protract proceedings; we just want to be given a clue about what some of the clauses mean. We would rather be told what they mean than waste time speculating about it.

Win Griffiths: You are appealing to the Under-Secretary to say a few words, I believe, Mr. Webb.

Chris Pond: I am happy to give a quick clarification—I am sure that the Committee will be pleased if it is quick.
 The clause sets out the consequences of a freezing order on a scheme. The power to freeze a scheme will be a new situation for schemes, so we want to set out the consequences clearly in the Bill. Trustees need to be certain about the effect of freezing orders on consequential matters such as accrual of increases, and whether they can comply with a pension sharing order. 
 It is necessary to make any action in contravention of the freezing order automatically void, to ensure that it has sufficient effect, but the regulator has discretion to validate actions because we must also ensure that we have a flexible and responsive regulator. The clause determines that any action in contravention of a freezing order will be void unless the regulator chooses to validate it, as permitted by clause 23, and it gives the regulator the power to impose a penalty on the trustees or managers of a scheme if they fail to take all reasonable steps to comply with a freezing order.

Win Griffiths: Before we proceed, it might be helpful if I say that if any Committee member would like a Government Minister to explain something about a clause to which no amendments have been selected for debate, they can stand up and ask about it; they do not have to rely on me to call the Minister.
 Question put and agreed to. 
 Clause 21 ordered to stand part of the Bill.

Clause 22 - Period of effect etc of freezing order

Amendment made: No. 24, in 
clause 22, page 15, line 7, after 'sections' insert 
 '[Effect of determination to wind up scheme on freezing order],' 
 —[Mr. Pond.]
 Clause 22, as amended, ordered to stand part of the Bill.

Clause 23 - Validation of action in contravention of freezing order

Question proposed, That the clause stand part of the Bill.

George Osborne: I want to ask the Under-Secretary about something; he touched on it when he gave his explanation of clause 21, but as the power of validation is given in clause 23 I thought that I would wait until now to raise the point. Clause 21 addresses the consequences of the freezing order. As the Under-Secretary said, it states that
''any action taken in contravention of the order is void''.
 That is reasonable. The whole point of the freezing order is to freeze things and to stop trustees and managers doing things that they should not do. 
 However, there is a get-out clause in clause 23. Subsection (1) states: 
''If a freezing order is made in relation to a scheme, the Regulator may by order validate action taken in contravention of the order.''
 In other words, someone could, in effect, break the law; they could break the terms of the freezing order but have their action made legal retrospectively. Will that not run the risk of encouraging some trustees and managers to break those terms in the hope that the regulator will subsequently validate their actions? That may be a false expectation; they may be over-confident of their abilities—or they may be genuinely concerned, because these provisions deal with schemes that are in a mess. However, will not clause 23 give them an 
 excuse to break the terms, and therefore undermine the whole point of the new power?

Chris Pond: That is a valid point—no pun intended. As I have explained on several occasions, the purpose of the freezing order is to make sure that the members' interests overall are neither enhanced nor diminished during the period for which it is in force. That is why any action is treated as void unless validated by the regulator. The purpose of the clause is to allow the regulator to provide a proportionate and flexible response to circumstances as they arise. Therefore, there may be actions that, as I have explained, do not affect the generality of interests of members of the scheme. In those circumstances, it is sensible for the regulator to have the power to validate those actions.
 This is a positive power, whereby the regulator must decide whether the actions would be validated. The hon. Gentleman's anxiety about the provision simply defusing the whole purpose of the freezing order is probably unjustified. The regulator will have a keen eye to see whether the trustees, or anyone else involved in the scheme, are trying to pull a fast one in that way, or are acting unwisely by arguing that certain actions should be validated. We must look to the expertise of the regulator to make sure that that danger is minimised. 
 Question put and agreed to. 
 Clause 23 ordered to stand part of the Bill.

Clause 24 - Effect of winding up of

Amendments made: No. 25, in 
clause 24, page 15, line 33, at end insert— 
 '( ) If the trustees or managers of a scheme fail to comply with a direction to them contained in an order under this section, section 10 of the 1995 Act (civil penalties) applies to any trustee or manager who has failed to take all reasonable steps to secure compliance.'.
 No. 26, in 
clause 24, page 15, line 34, leave out 
 'Section 10 of the 1995 Act (civil penalties) applies to a' 
 and insert 
 'That section also applies to any other'.—[Mr. Pond.]
 Clause 24, as amended, ordered to stand part of the Bill. 
 Clause 25 ordered to stand part of the Bill.

Clause 26 - Power to give a direction where freezing

Amendment made: No. 27, in 
clause 26, page 16, line 15, leave out paragraph (a).—[Mr. Pond.]
 Question proposed, That the clause, as amended, stand part of the Bill.

Steve Webb: A little steer from the Under-Secretary might be helpful.

Chris Pond: The clause introduces the regulator's powers to give directions when no winding-up order
 has been made, but the freezing order has ceased to have effect. That will happen when the period for which it was made expires, or when the regulator revokes the order using its powers under clause 75. When a freezing order is lifted, the regulator can direct what benefits, if any, accrued to the members during the freezing period, make accruals subject to the member making contributions, and direct the employer, too, to contribute to cover the cost of those benefits—a matter that the hon. Gentleman raised a few moments ago. The clause gives the regulator the power to make those adjustments, and the regulator will be in an excellent position to know and understand the scheme, having monitored it closely during the freezing period.
 Question put and agreed to. 
 Clause 26, as amended, ordered to stand part of the Bill.

Clause 27 - Notification of trustees, managers,

Amendment made: No. 28, in 
clause 27, page 17, line 33, leave out from 'If' to 'who' in line 35 and insert 
 'the trustees or managers of a scheme fail to comply with a direction to them contained in an order made under subsection (3), section 10 of the Pensions Act 1995 (c.26) (civil penalties) applies to any trustee or manager'.—[Mr. Pond.]
 Question proposed, That the clause, as amended, stand part of the Bill.

George Osborne: The clause requires the regulator to inform
''trustees or managers of the scheme, and . . . the employer in relation to the scheme, of the fact that the''
 freezing 
''order has been made''.
 We debated whether the regulator should do that within 24 hours or as soon as was reasonably practicable. I do not propose to rerun that debate even if you allowed me to, Mr. Griffiths. 
 However, there is a difference between the treatment of the provision of information to trustees, managers and employers, and the treatment of provision of information to members of a scheme. Under subsection (2), the regulator ''must'' inform the trustees, the manager and the employer. However, under subsection (3), 
''The Regulator may . . . direct the trustees or managers . . . to notify''
 scheme members. Presumably, he may not. In other words, a regulator might know that there is an immediate risk to a scheme and impose a freezing order, and then tell the managers and employer, but not the scheme members, who would be the only people kept in the dark. Certainly, I would want to know if my scheme—the parliamentary scheme—were subject to a freezing order and would expect someone to tell me that.

Malcolm Wicks: Has the hon. Gentleman not heard?

George Osborne: Thankfully, I will be here for a very long time, so I could easily wait six months.
 There is a serious point to be made. Surely we want members to know about a freezing order and to be given all the information necessary. If it is in place for only a day, it might be impractical to try to inform all the members, so perhaps there should be a requirement to inform members of the scheme only if the freezing order is for longer than a month or two months. Perhaps the regulator would inform the members in those circumstances anyway, but it would be useful to the Committee if the Under-Secretary gave us an idea as to why the Government felt that it was not necessary to require schemes to inform their members. Perhaps he could also set out how the Government hope the regulator will act in such situations and how he or she will exercise the discretion provided for in subsection (3).

Chris Pond: I agree wholeheartedly that we want members to know about the circumstances and requirements of freezing orders. Although the regulator will have relatively easy access to trustees, managers and employers, we are talking about a wide variety of schemes. Some are large, some are small, some are spread across different sections of a company and some are spread across borders. Therefore, ensuring the regulator's quick access to members is much more difficult. It is for that reason that the Bill requires the trustees, managers and employers to be informed by the regulator, and the regulator may inform members. Indeed, where there is easy access to the membership, the regulator will probably decide to do that.

Kevin Brennan: I understand the Under-Secretary's explanation, but would it not be possible for the regulator to direct the managers and trustees to inform the members as soon as is practicably possible?

Chris Pond: I welcome that point and reassure my hon. Friend that the regulator will have the right to instruct the trustees and employers to inform the membership. That recognises that it will be much easier for trustees and employers to inform the membership than it would be for the regulator, as trustees and employers can do so through notice-boards, newsletters and normal correspondence with their employees. That right will exist and the regulator will use it when appropriate.

Steve Webb: The Under-Secretary touches on the important issue of the quality of information that schemes keep on their members, such as where their members are and their rights. Recently, in one appalling example, the Government wanted to introduce a change of priority and a winding-up order, but could not because the scheme's records were so bad that they did not know how long people had been in it. The clause has been framed in such a way because the data on members can be awful. Do the Government have plans to ensure that the information that schemes keep on members is much better than it has been?

Chris Pond: The hon. Gentleman raises an important point. I hope that we will deal with the information requirements of the Bill very soon. Those requirements will explicitly address his concerns.

George Osborne: May I take the Under-Secretary back to his exchange with the hon. Member for Cardiff, West (Kevin Brennan)? Subsection (3) states:
''The Regulator may . . . direct the trustees or managers of the scheme to notify . . . the members''.
 I am not sure why that should not be a requirement rather than a right. It should be a requirement of trustees and managers to inform scheme members that their scheme is subject to a freezing order. Why is there not that mandatory requirement? Even where there are poor scheme records, the trustees could place an advert in a newspaper if they had to. That might be a blunt instrument, but at least they could make an attempt to inform scheme members.

Chris Pond: That goes to the heart of the nature of the regulator. It is a new kind of regulator, which is intended, as I said the other day, to be light on its feet, flexible and responsive, and able to use evidence-based decision making. It is not sensible to include in the Bill how the regulator will ensure that members receive the appropriate information. That would tie the regulator and perhaps impose additional administrative burdens on employers and the regulator itself.
 In circumstances in which the regulator has easy access to the membership—perhaps in a small scheme—it is sensible that it informs members. In other circumstances, the regulator may have to require the trustees and employer to inform members. In yet more circumstances, the trustees and the employer may be fully co-operative with the regulator and will automatically inform their members of the new circumstances and the freezing-order requirement. The Bill provides for that flexibility.

Kevin Brennan: I am grateful for the Under-Secretary's explanation. Is he saying that, in practice, members will be informed as soon as practicably possible by one or other of the means that we have debated?

Chris Pond: That certainly is the intention. We want to ensure that members are fully informed as quickly as possible and with as much accuracy as possible.
 Question put and agreed to. 
 Clause 27, as amended, ordered to stand part of the Bill.

Clause 28 - Supplementary provision relating to

Question proposed, That the clause stand part of the Bill.

Kevin Brennan: I just wanted to raise a further point about consultation. I am not sure whether now is the appropriate moment, but it relates to clause 28 and some worries that have been raised by the trade union, Amicus, about consultation and freezing orders.
 As clause 28 will allow the regulator to make freezing or winding-up orders without reference to 
 anyone, Amicus is concerned that there should be some requirement to consult members of a scheme before an order is made. That might not be a practical position, but that is the issue that the trade union wants to probe. Perhaps the Under-Secretary will comment on the possibility of scheme members being consulted before any major changes—in particular, freezing orders—are made and on consultation more generally as it relates to the Bill.

Chris Pond: My hon. Friend raises an important point. The purpose of the freezing order is to take swift action when it looks as if a scheme is getting into trouble. If action is to be taken in a matter of hours or days, the consultation process is not possible. As I have said several times, the purpose of a freezing order is to ensure that the interests of members are neither enhanced nor diminished during that period. Even when it is not possible to consult and quick action has to be taken—I am sure that the regulator would wish to consult whenever feasible—the members can be reassured that the purpose of that action is explicitly to protect their interests and is not intended to damage them. I hope that Amicus will understand that there will be circumstances in which the regulator just has to act.

Bill Tynan: If a scheme is in trouble and the trustees decide to wind it up, will they have to notify the regulator of their intention and will there be an opportunity for the regulator to impose a freeze on that scheme before it is wound up?

Chris Pond: No, in those circumstances the trustees would not have to inform the regulator that they had decided to wind up the scheme. I am sure that the regulator would take an interest in whether the circumstances were appropriate and would want to ensure that members' interests were protected, but I do not think that there would be any formal requirement for the trustees to inform the regulator that they would be taking that action.
 Question put and agreed to. 
 Clause 28 ordered to stand part of the Bill.

Clause 29 - Prohibition orders

George Osborne: I beg to move amendment No. 151, in
clause 29, page 18, line 17, at end insert 'forthwith.'.

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment No. 152, in 
clause 29, page 18, line 20, at end insert— 
 '( ) Alternatively, any person prohibited under this section may apply to the high court for judicial review of the decision.'.
 Amendment No. 150, in 
clause 29, page 18, line 29, leave out subsection (5).

George Osborne: Let me say from the outset that I would appreciate a stand part debate on this clause.
 The clause prohibits a person from being a trustee of any scheme on the grounds that they are not a fit 
 and proper person. It contains a significant extension of the powers in the Pensions Act 1995, which restricts prohibition to serious and persistent breaches of specific parts of pensions law. The clause contains a much broader power to prohibit people who are not, in the view of the regulator, fit and proper persons. 
 Amendment No. 151 is intended to add urgency to subsection (2), the effect of which is to remove a trustee from a scheme. I want to add the word ''forthwith'' to make it clear that that should happen immediately. Perhaps the Minister could clarify whether that would be the case and whether it would happen the moment the decision to issue a prohibition order was made by the regulator or when the information was passed on to the trustee. When would removal take place? 
 Amendment No. 152 is slightly lengthier and would insert a new sentence. If a person were prohibited from being a trustee because they were not a fit and proper person, that could have an enormous impact on their professional, and possibly their private, life. If they were, for example, a finance director, being deemed not to be a fit and proper person to be a trustee could finish their career. One hopes that a prohibition order would only be issued when it was justified. However, given that it is likely to have such a serious impact on someone's life, surely people must be given the chance to appeal. 
 As I understand it, under subsection (3) the appeal can only be made, in effect, to the regulator. Perhaps the Under-Secretary will tell me that the determinations panel makes the decision and that the regulator hears the appeal, or that the tribunal, which we will come to, hears the appeal. However, given the seriousness of a prohibition order's effect, a person should be given the option to get outside the system and to appeal beyond the organisation in its totality which is imposing the prohibition order. 
 That organisation might be prejudiced by the fact that it felt it necessary to issue the prohibition order in the first place. Amendment No. 152 would give the prohibited person the power to apply to the High Court to get a judicial review of the decision. The Under-Secretary may tell me that that can happen in any case and that a person has the right to apply to the High Court for a judicial review. However, I am not a lawyer so I thought that I would get him—or rather the lawyers who advise him—to explain that that is the case. It is important that someone in extremis should have the right to appeal against a decision to an organisation outside the structure of the regulator, its determinations panel and the tribunal. 
 Finally, amendment No. 150, which is a probing amendment, would remove subsection (5). It seems a strange and blanket provision that a revocation of a prohibition order 
''cannot affect anything done before that time.''
 What is meant by that?

Chris Pond: The hon. Gentleman is correct in saying that the clause extends powers in the 1995 Act. I am sure that he and other hon. Members will be pleased to
 know that it imposes the same standards on trustees as exist in legislation on other groups that look after money, such as insolvency practitioners, bookmakers and auditors, as well as, I am advised, slaughtermen and taxi drivers. It is appropriate that trustees should at least match the standards required of those groups.

Win Griffiths: Bookies.

Chris Pond: Yes, if you like—bookies.
 Clause 29 concerns the prohibition of people from being trustees of pension schemes. Amendment No. 151 suggests an additional word: that prohibition should take place ''forthwith''. The amendment would have no effect, as the intention is that such orders would take force immediately.

George Osborne: When the Under-Secretary says ''immediately'', does he mean that the orders will take effect from the moment at which the regulator makes the decision, or from the moment at which the individual is informed of it?

Chris Pond: I am advised that the order will take effect from the moment at which the decision is taken.
 Amendment No. 151 appears to seek an alternative route of appeal for those prohibited as trustees of pension schemes. However, that is misconceived, as the remedy of judicial review is always available if there has been procedural unfairness. That does not need to be specified in the Bill. It is also important to note that judicial review is concerned with reviewing not the merits of the decision in respect of which the application for judicial review has been made, but the decision-making process itself. 
 Trustees who are prohibited will be able to make a reference to the pensions regulator tribunal and seek to have the decision overturned. At a later stage, they may ask the regulator to revoke the prohibition order. They may have been deemed an unfit person to fulfil the role of trustee because they have insufficient understanding of pensions law. If they are prepared to go on a crash course in pensions law and are then deemed to understand their responsibilities properly, the regulator may decide to revoke the prohibition order. The amendment would add nothing to the rights of prohibited trustees, but might add to their and the regulator's costs if an application for a judicial review were made without merit. 
 Amendment No. 150 removes the subsection that provides that anything done by the trustees during the period between the making and revocation of a prohibition order is valid. That is the same provision as in section 3(4) of the 1995 Act. It protects trustees and scheme members from the consequences of any revocation. Many schemes and some legislative exemptions require trustees to make decisions unanimously. If the subsection is removed, decisions made during the revocation might be deemed to have been invalid. That would leave trustees in a difficult position. For example, allowing ill-health or early retirement pension payments would be void and subject to challenge, as would investment decisions and statutory appointments. 
 The hon. Member for Tatton said that it could have serious consequences for an individual's professional 
 advancement if they were deemed not to be a fit and proper person to act. The Bill does not refer to the details of the regulator's judgments or the basis of them, but the following issues would be considered: the trustees' probity, competence and soundness of judgment; the diligence with which they fulfil their responsibilities; whether the interests of members of the scheme or schemes in question are in the opinion of the regulator prejudiced by their acting as trustees; and whether they have contravened any provision of the pensions legislation relating to the provision or management of pensions in a country or territory outside Great Britain.

George Osborne: As I said, I hope that there will be a stand part debate on the clause. However, I am satisfied with the Minister's comments on my amendments, in particular the confirmation that there will be a power to seek a judicial review of a decision, albeit in terms of whether the process was properly carried out. Therefore, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

George Osborne: I want to make a more general point about the prohibition orders and the role of trustees. An important principle that underlies all pensions legislation is that the people who are primarily responsible for the good governance of occupational pension schemes are the trustees. As a member of the Public Accounts Committee, I read the reports of the National Audit Office very carefully, and I think that it was that organisation which stated that trustees are an initial defence in the sound operation of occupational pension schemes. It is their job to preserve trust assets and deal with them in the best interests of beneficiaries, to ensure that there are sufficient assets to cover scheme liabilities and to act if there are not, to ensure that the employer is fulfilling its obligations, to appoint the professionals, and so forth. It is an important job, and it is important that the regulator has the power to remove trustees who are not doing their job.
 The Under-Secretary referred to the fact that a trustee may not be up to the job. There are two possible reasons for that. All of us readily understand the first. A trustee might be a crooked or bad person. At present, OPRA can undertake a few checks on the suitability of a trustee, but there are restrictions. It can investigate whether a trustee is disqualified from being a trustee, but he might be a disqualified director or an undischarged bankrupt, or have a criminal record for financial fraud. As I understand it, there is no power for OPRA to check such things, even though trustees have to sign the form saying that they are a fit and proper person. 
 The clause gives the pensions regulator the power to prohibit a person from being a trustee if he is not a fit and proper person. Will the new regulator attempt a broader investigation of newly appointed trustees? Things have changed since the 1995 Act. We now have the Criminal Records Bureau and various new tools are available to the regulator. However, the knowledge 
 gap, if I may call it that, on the background of newly appointed trustees exists—it was identified in the NAO report into OPRA—and I am interested to know whether the regulator will run a check on every new trustee and how that process is envisaged to take place. 
 I said that two types of people might not be fit and proper persons. The first is a bad or crooked person, who should not be let loose near anyone else's money. Secondly—the Minister said this in a previous debate—a person might not be fit and proper if he does not have sufficient knowledge of pensions law. That is different; that might just be ignorance. One feature of the Myners report, for example, was his finding that trustees often had very little knowledge of some of the principles of asset investment or the specifics of pension law. He said: 
''there should be a legal requirement that where trustees are taking a decision, they should be able to take it with the skill and care of someone familiar with the issue concerned.''
 Later, we will debate whether there should be such a requirement that trustees have a knowledge of pensions, trust law, the principles of funding occupational pensions and the principles of investment management, but does the fact that a trustee not have such knowledge or understanding mean that they can be prohibited because they are not fit or proper? That could have serious consequences. 
 The pensions fund trustee survey attached to the Myners report found that of the 226 trustees questioned, 62 per cent. had no professional qualifications, 26 per cent. had less than one day's training and 79 per cent. had other full-time jobs. There was also a striking lack of knowledge about, for example, the benchmarks used by the schemes of which they were supposed to be trustees. 
 When the Bill is enacted, because of its proper requirement that trustees have a knowledge and understanding of all those matters, those people could suddenly find themselves prohibited because of provisions in the clause. There could be a raft of prohibition orders because people do not have the requisite knowledge. I assume that the regulator will act with some flexibility and will not come down like a ton of bricks on all the worthy volunteers who do this job across the country, by issuing prohibition orders left, right and centre. 
 The Minister said in an earlier debate that one of the definitions of why someone is not fit and proper is if they have no knowledge of pensions law. They could be prohibited while they were sent off on a course to learn about pensions law. I am not sure that we would want a large number of people prohibited and sent off on courses because even if a prohibition order is in force for a short time, that would still have an impact on their professional standing and career prospects. 
 We may come on to the register of prohibited people, which will contain information on trustees. We do not want its more general impact to be that the only people who are trustees of pension funds are, in effect, professional trustees. We could lose that large number of voluntary trustees who, by and large, do a good job 
 and represent members' interests, even if they are not professionals in the sense of being totally conversant in trustee law and the principles of assets investment.

Chris Pond: The hon. Gentleman made some important points, but I feel that he spoiled some of them by over-egging the pudding and suggesting that swathes of trustees would be prohibited or sent on training courses.
 We need to put the debate in context. The hon. Gentleman and other hon. Members may be reassured to learn that in 2002–03, OPRA prohibited only 11 trustees. A trustee who is prohibited will have the option of either taking the case to the tribunal or, having taken ameliorative action, asking for the prohibition to be lifted. The question is whether trustees are professional in going about their tasks. We do not in the Bill seek to ensure that all trustees are professional trustees, as the hon. Gentleman suggested, but we would wish all trustees to act in a professional manner. As he acknowledged, trustees have an important responsibility. They are the people who will in large part determine the interest of the members of a pension scheme. We would expect trustees to behave professionally and to undertake those responsibilities seriously, as would the members. 
 If a trustee is considered to be acting improperly or incompetently, they will face prohibition by the regulator. That must be an option. The reasons why a trustee is acting incompetently may be to do with a lack of understanding about pensions, their responsibilities or the additional skills that they require. All I would say is that we shall discuss the issue later. The hon. Gentleman mentioned the Myners report and the requirement to educate trustees. Since we shall discuss that in some depth when we come to part 5, I suggest that the Committee defer further discussion on the matter until we reach that point.

George Osborne: Of course the Under-Secretary is right that the bigger discussion about the role of voluntary trustees versus professional trustees is best saved for later in the Bill. He mentioned that 12 had been prohibited.

Chris Pond: Eleven.

George Osborne: Eleven.

Chris Pond: It may be 12 by now.

George Osborne: It may indeed. That figure is partly because the 1995 Act is tightly drawn and provides for orders against people who have been in ''serious or persistent breach'' of specific parts of pension law. The clause, however, gives a much broader definition of a person against whom such orders may be issued, which is someone who is merely
''not a fit and proper person to be a trustee''.
 In his discussions with OPRA and so on, has the Minister made any estimate of whether there will be a large increase in the number prohibited as a result of the clause, or does he expect the figure to remain at less than a dozen a year?

Chris Pond: I would not like to put figures on that. We are not expecting that huge numbers of trustees will be deemed unfit to carry out that responsibility. I am sure that the Committee would want to join me in paying tribute to the great majority of trustees who do an excellent job on behalf of the members of those schemes. In our discussions, we in no way want to undermine the commitment or professionalism that most trustees bring to their work.
 As the hon. Gentleman indicated, however, some individuals may well be deemed to be neither fit nor proper to have such considerable responsibility for the pension interests of members, because of their activities outside their roles as trustees. In other financial walks of life, trustees may have been considered to have acted improperly. I am sure that the Committee would agree that it is important that the regulator takes that into account. 
 I do not wish to detain the Committee by talking about the way in which OPRA will identify those circumstances. With your permission, Mr. Griffiths, and that of the Committee, we will write in detail to members of the Committee about the sort of checks that the regulator will carry out. That might give the hon. Gentleman a better idea of the number of people who will be affected. 
 Question put and agreed to. 
 Clause 29 ordered to stand part of the Bill.

Clause 30 - Suspension orders

Chris Pond: I beg to move amendment No. 29, in
clause 30, page 18, line 40, leave out paragraph (a) and insert— 
 '(a) after subsection (1)(a) insert— 
 ''(aa) pending consideration being given to the institution of proceedings against him for an offence involving dishonesty or deception,'','.

Win Griffiths: With this it will be convenient to discuss Government amendments Nos. 30, 94, 96 and 102.

Chris Pond: As with most of the Government amendments, these are fairly technical amendments to make sure that the Bill is clear and easy to understand. Unless members of the Committee wish to raise particular issues, I suggest that they accept the amendments as an improvement to the Bill.
 Amendment agreed to. 
 Amendment made: No. 30, in 
clause 30, page 19, line 4, leave out sub-paragraph (i) and insert— 
 '(i) in paragraph (a) after ''paragraph (a)'' insert ''or (aa)'','.—[Mr. Pond.]
 Clause 30, as amended, ordered to stand part of the Bill.

Clause 31 - Appointments by Regulator

George Osborne: I beg to move amendment No. 185, in
clause 31, page 19, line 40, leave out— 
 '(a) by the employer'.

Win Griffiths: With this it will be convenient to discuss amendment No. 186, in
clause 31, page 19, line 42, leave out— 
 '(c) partly by the employer and partly out of those resources.'.

George Osborne: These two probing amendments are designed to elicit information from the Government. They deal with the fees and costs of the trustee appointed by the regulator. I am sure that we shall have a broad debate later in our proceedings about where the cost of expert advice should fall and how we should deal with a situation in which professional fees are eating into the resources of a scheme, something that we have all come across.
 Under subsection (2), the regulator can decide to charge an employer or a scheme—or both—for the costs of trustees. That is a change from the 1995 Act. Will the Under-Secretary explain the reason for that change? It could mean that considerable direct costs fall either on the scheme or on the employers, who may not be culpable for the problems of the scheme, yet may be required to pay significant costs. In the long run, the cumulative effect of that would be to discourage employers from offering final salary schemes, which we all accept is a trend and a problem. I tabled the amendments so that the Under-Secretary could explain how the expenses and fees of trustees appointed by the regulator will be paid, how the determinations of who should pay will be made and whether the decisions can be appealed against. What check will be made that the trustees are not charging unreasonable fees and that the regulator has not gone for the most expensive City firm to employ the most expensive trustees when they are not necessarily the people who are needed?

Steve Webb: The amendments raise the important issue of who meets the costs of some of the regulatory burdens. The hon. Member for Tatton said that the employer might not be culpable, as indeed he might not; but he might be. The amendments would remove the power of the regulator to apply any cost, in whole or in part, to the employer. I think that essentially the hon. Gentleman was saying that it should not necessarily always be the employer who pays the whole amount; however, it does not follow that the employer should never pay any of it. For that reason I would not support amendments Nos. 185 and 186.

George Osborne: I did point out that the amendments were probing amendments. Perhaps if the hon. Gentleman were to table some amendments to the Bill, he would know what it is like to table a probing amendment.

Steve Webb: I assure the Committee that there are plenty in the pipeline.
 The hon. Gentleman raised another, serious, issue; I may risk inducing another intervention when I say that I find it slightly startling to find a Conservative Member worrying about the ravages of the free market, and worrying about competition in trustees leading to a fiercely competitive market, where there was minimum cost but where trustees might somehow exploit schemes or employers. 
 It is not clear to me, with respect to the clause or the amendments, whether we are dealing with cases in which, for example, a trustee is prohibited or suspended and the regulator replaces him with someone else, or with cases in which a scheme is to be wound up and the regulator appoints an independent trustee to see to that. 
 That brings me back to the issue to which a satisfactory response was not received on Tuesday: the way in which trustees' costs mount up. A response that was mentioned on the Labour Benches on Tuesday was to nationalise the process. I have on occasion mooted the idea that there should at least be a not-for-profit option for the process of winding up a scheme or of acting as an independent trustee. 
 Very often, there is not enough money in the funds in question, and it seems immoral that that should be the chance for someone to make a fast buck. If there is a public sector body—the regulator—appointing a trustee, I cannot see why that should be an opportunity for someone to make a profit. The private sector having gone wrong, and the regulator having put in a trustee as a result, it would seem that the state should ensure that the process is properly undergone. The trustees should thus, for example, act on the regulator's behalf—perhaps even as employees of the regulator, although I do not know whether that is consistent with the spirit of the Bill. 
 Whoever were to pay in such a case—employer or scheme—I should be worried if they had to line the pockets of a trustee who was in it for the money. Once things have gone wrong with a scheme and there is not enough money for the pensioners and the workers anyway, everything possible should be done to minimise the call on the fund. I ask the Minister for reassurances that the regulator would adopt that approach.

Kevin Brennan: As I am sure the Under-Secretary knows, workers and pension scheme members really become irate when independent trustees charge exorbitant sums of money for answering proper letters from workers who simply want to find out what has happened to their pension, and when those trustees take huge chunks of money out of pension schemes that are in wind-up. The spectacle of such exorbitant fees being accepted has caused great and understandable anger among workers whose pensions are at risk.
 I have always felt that there is a problem in the market for independent trustees. Very few firms offer that service and there seems to be little competition and a great deal of collusion between those companies. We are told that a high degree of specialism and expertise is necessary. 
 In cases of such market failure, the argument for Government action and state intervention arises. I used the term ''nationalise'', which is not very popular these days, but there is a case to be made for the regulator having some of the relevant expertise in-house and being able to offer the service in question. I invite the Under-Secretary to make observations on whether that would be possible 
 within the scope of the Bill. Does he anticipate—as a regular occurrence—that, in cases where the wind-up was straightforward and did not require scarce outside expertise, the pensions regulator could directly solve the problem? 
 I understand that the hon. Member for Tatton and his colleagues have tabled amendments that are probing in their nature. However, I would observe that although the hon. Member for Northavon was correct when he said that there are occasions when the employer could be at fault, there are never occasions when the employee is at fault in those matters. We must remember that from time to time, because they are the ones who pay the price.

Chris Pond: My hon. Friend makes an important point and we must recognise that the purpose of the Opposition amendments is to remove the regulator's power to apportion the costs between the employer and the scheme, or to require that the employer pays them. That would be a significant change, because currently in the great majority of cases OPRA requires that the employer pays the trustees' costs. The amendment would increase the anger that would be felt by members and would have a considerable impact, in the ways that have been expressed so eloquently by my hon. Friend.

Bill Tynan: In a previous intervention, I asked a question about wind-ups and the regulator. This provision deals with the regulator appointing a trustee. My hon. Friend the Member for Cardiff, West made the point that where a scheme is wound up, huge sums are often deducted for answering letters. If, within the Bill, there is not the opportunity to have the regulator involved before a wind-up, the point that he made will continue to apply. How could we overcome that?

Chris Pond: I can tell my hon. Friend that there will be many circumstances where the regulator becomes involved before wind-up. That is part of the reason why we have been discussing the freezing order process and, indeed, the other mechanisms that the regulator can use to intervene before a winding-up process takes place, such as the improvement and the third party notices. While we do not expect the regulator to run pension schemes—it would be quite wrong to expect it to do that—we want to ensure that where schemes start to run into trouble the regulator is there to ensure that, wherever possible, winding up can be avoided.
 On the point made by my hon. Friend the Member for Cardiff, West and by the hon. Member for Northavon about the cost of trustees where they are appointed when schemes have run into trouble, I can tell them that there is concern about the level of fees charged by trustees in those circumstances. The Minister will be tabling a Government amendment to deal with that issue later. 
 I can give the Committee the reassurance that any trustee appointed by the regulator will either be a trustee appointed from a register held by the regulator or will be a member. In the case of schemes with no trustee, a member is often appointed to reduce the overall costs of the process. That might go part of the 
 way towards the suggestion made by my hon. Friend the Member for Cardiff, West about in-house expertise. Trustees will be eligible to be on that register only if they agree to a monitoring of fees by the regulator. That is in recognition of the fact that so many people are concerned about the level of fees charged at the moment, and that those fees can eat deeply into the scheme funds, which may already be diminishing.

Steve Webb: What the Under-Secretary has said is extraordinarily welcome and potentially very significant, but does that not throw into even sharper relief the comment of the hon. Member for Hamilton, South (Mr. Tynan)? He said that, when the regulator was involved, there might be a not-for-profit situation in which money was not siphoned out of a fund, but if the regulator was not involved in a wind-up, people could be victims in just the same way. Will there be a mechanism whereby people can ask the regulator to get involved as soon as they know that their scheme is being wound up?

Chris Pond: In response to my hon. Friend the Member for Hamilton, South, regulations require regular reports to OPRA, the current regulator, when schemes are winding up. Of course, the new regulator will continue to have that role. We are not suggesting that the regulator should take one step back from that.
 On the point made by the hon. Member for Northavon, the clause gives an opportunity for trustees, employers and members to request that the regulator appoints a trustee, if trustees or employers feel that they do not have sufficient expertise, or if members feel anxiety about that. At the moment, they can only informally ask OPRA to do that. If OPRA ignores them, which I am sure it would never do, there is nothing that any of those groups can do to require the request to be treated seriously. With those reassurances, I hope that the amendments will be withdrawn.

George Osborne: Sometimes one strikes gold with probing amendments. We have discovered that there is a whole new bit of the Bill to come. I was not aware of that. I am therefore delighted that I tabled the amendments, even if they attracted some sarcastic comments from the hon. Member for Cardiff, West—

Kevin Brennan: Not from me.
Mr. Osborne—and from the hon. Member for Northavon. Given that we have learned some important information, I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Clause 31 ordered to stand part of the Bill. 
 Clause 32 ordered to stand part of the Bill.

Clause 33 - Regulator's right to apply under

Amendment made: No. 31, in 
clause 33, page 20, line 13, leave out 
 'for the purposes of Part 1 of the Pensions Act 1995'.—[Mr. Pond.]

George Osborne: I beg to move amendment No. 188, in
clause 33, page 20, line 31, leave out subsection (7).
 This is another probing amendment. It would remove subsection (7), which says that the clause does not apply if the actuarial valuation that established that the assets were insufficient to meet protected liabilities took place before the Bill came into force. I understand that that is a way of commencing the clause, but presumably the clause cannot commence until the Bill becomes an Act. 
 Perhaps I am missing something—it was midnight when I was looking at the clause—but it seems that the actuarial valuation referred to in subsection (3) is obtained by the PPF board. As the board does not exist until the Bill comes into force, I am not clear as to how it can obtain an actuarial valuation, and so I am not sure that subsection (7) is relevant. However, I have probably missed something, and the Under-Secretary will probably explain.

Chris Pond: Let me explain that the clause is designed to give the regulator the same standing as insolvency practitioners to pursue any debt due to a pension scheme by reason of transactions that it suspects were made at an undervalue—
 It being twenty-five minutes past Eleven o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
 Adjourned till this day at Two o'clock.